Optimal Social Assistance and Unemployment Insurance in a Life-Cycle Model of Family Labor Supply and Savings

Peter Haan and Victoria Prowse
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Peter Haan: DIW Berlin

No 189, Rationality and Competition Discussion Paper Series from CRC TRR 190 Rationality and Competition

Abstract: We empirically analyze the optimal mix and optimal generosity of unemployment insurance and social assistance programs. To do so, we specify a structural life-cycle model of the labor supply, savings, and social assistance claiming decisions of singles and married couples. Partial insurance against wage and employment shocks is provided by social programs, savings, and the labor supplies of all adult household members. We show that the optimal policy mix is dominated by moderately generous social assistance, which guarantees a permanent universal minimum household income, with only a minor role for temporary earnings-related unemployment insurance. The optimal amount of social assistance is heavily influenced by income pooling in married households. This pooling provides partial insurance against negative economic shocks, reducing the optimal generosity of social assistance.

Keywords: unemployment insurance; social assistance; design of benefi t programs; life-cycle labor supply; family labor supply; intra-household insurance; household savings; employment risk; added worker e ffect (search for similar items in EconPapers)
JEL-codes: H21 I38 J18 J68 (search for similar items in EconPapers)
Date: 2019-09-30
New Economics Papers: this item is included in nep-dge, nep-ias and nep-mac
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Related works:
Working Paper: Optimal Social Assistance and Umemployment Insurance in a Life-Cycle Model of Family Labor Supply and Savings (2017)
Working Paper: Optimal Social Assistance and Unemployment Insurance in a Life-Cycle Model of Family Labor Supply and Savings (2015)
Working Paper: Optimal Social Assistance and Unemployment Insurance in a Life-Cycle Model of Family Labor Supply and Savings (2015)
Working Paper: Optimal Social Assistance and Unemployment Insurance in a Life-Cycle Model of Family Labor Supply and Savings (2015)
Working Paper: Optimal social assistance and unemployment insurance in a life-cycle model of family labor supply and savings (2015)
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